The East Bay real estate market made a notable shift in April of 2022. As you can see from the graph below, average home prices in the Central Contra Costa County* peaked and began to decline. But by the end of the year, they had leveled off, and were still higher than the same time period in 2021. Both the three and five year rates of return were also up.
There are several contributing factors leading to the shift, some national and some local. Mortgage interest rates going up and the stock market going down are the two main national factors suppressing buyers’ purchasing power and motivation. Buyers’ monthly budget can purchase less as mortgage rates go up and down payments are going down as buyers are less likely to pull money out of a suppressed stock market portfolio.
Locally, in addition to the above national factors, the market is seeing changes due to the tech sector. Disruptors, like Elon Musk, are laying tech workers off and requiring remote workers to return to offices. The layoffs haven’t directly affected the market, but have stirred uncertainty into tech buyers’ minds. Those buyers have taken themselves out of the market and on to the sidelines waiting for more job certainty (security).
As you look at this second graph you will see that the number of transactions dropped by 30% in 2022. While this lack of supply might normally drive prices up, the lack of demand has matched it. The result is a more neutral market. Gone are the days of multiple offers within a week with minimal or no contingencies. Buyers now have some control to investigate properties more fully and can be a little more picky (selective). The truth is mortgage rates only seem high compared to the 3% range where they were. The 6-7% rates are fair to midline for mortgage rates looking back 30 or more years.
If you are curious about your home’s current value or if you are thinking about buying in 2023, please give us a call.
*Alamo, Blackhawk, Clayton, Concord, Danville, Diablo, Lafayette, Martinez, Moraga, Orinda, Pleasant Hill, San Ramon, Walnut Creek.
